Cattle-Fax Sees Higher Corn Prices Continuing

Higher corn prices are here to stay...the ethanol boom and continued feed demands will pressure feed costs at feedyards.

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Higher corn prices are here to stay, says Randy Blach, vice president of Cattle-Fax. Speaking at last week's joint convention of Texas Cattle Feeders Association and Texas and Southwestern Cattle Raisers Association in Amarillo, TX, Blach said the ethanol boom and continued feed demands will pressure feed costs at feedyards.

"This isn't a short-term thing," he said, noting U.S. ethanol production will likely see its corn usage increase from nearly 3 billion bu. to about 6 billion bu. within a few years. In addition, feedyard capacity increased by 22% from 1990-2004, "and we're still adding pens," he says.

"The need for good fundamental market information is greater today than it's ever been," Blach says.

Clayton Yeutter, USDA Secretary from 1989 to 1991, said the government's 51¢/gal. subsidy for ethanol production allows an ethanol plant to "pay for itself in 18 months. So ethanol is the real wild card for beef production costs."

Yeutter projects higher corn prices in the short term, and possibly the intermediate term. He believes increased ethanol production could foster more flexibility in the next farm bill, as some want more Conservation Reserve Program acres put back into production to help meet the demand for more corn.-- Larry Stalcup